Israel Approves 8% Raise in Holiday Pay for Private Sector Workers

Israeli Deputy Prime Minister and Minister of Labor, Yariv Levin, has signed an order to increase "holiday pay" (dmei havra'a) for private sector employees, effective retroactively for 2026. The daily rate will rise by 8%, from NIS 418 to NIS 451.5, an increase of NIS 33.5 per day. This adjustment means employers who have already paid holiday pay for 2026 at the old rate will need to pay the difference. The total increase for employees will range from NIS 167.5 to NIS 335 annually, depending on their seniority and the number of days they are entitled to, which ranges from five days for those in their first year to ten days for employees with 20 or more years of service.

The agreement, finalized by the Histadrut labor union and the Business Sector Employers' Association in June, addresses a stagnation in holiday pay rates. The rates in the private sector had not been updated since 2023. Furthermore, during 2024 and 2025, one holiday pay day was deducted from each employee as part of government measures to fund war expenses, resulting in a cumulative loss of over NIS 1,000 for some workers over those two years.

While holiday pay is typically meant to be adjusted according to the consumer price index, this linkage is not automatic in the private sector. It requires a collective agreement signed by labor unions and employers, followed by the Minister of Labor's signature on an expansion order. The Ministry of Labor stated that the current increase is a result of the rise in the consumer price index. In contrast, public sector employees already saw their daily holiday pay rate updated to NIS 511.6 this year, up from NIS 471.

Holiday pay is a mandatory annual payment from employers to employees, based on their tenure. Originally intended to help workers fund vacations or stays at rest homes, it is now essentially a financial benefit paid in addition to salary, without the need for proof of expenditure.